Romney: Let’s raise the minimum wage

posted at 2:01 pm on May 9, 2014 by Ed Morrissey

Alternate headline: Romney not running for President in 2016. Mike Barnicle braced Mitt Romney on the GOP’s demographic issues and its “conservative bent” on popular initiatives like immigration reform and a minimum-wage hike. Romney talks about the big tent of Republicanism, but notes that he supports a minimum-wage hike:

“I think we ought to raise it, because frankly, our party is all about more jobs and better pay, and I think communicating that is important to us,” Romney said on MSNBC’s “Morning Joe.”

In recent days, two of Romney’s former opponents, Rick Santorum and Tim Pawlenty, have also urged their part to raise the minimum wage.

Republicans are correct to aim toward blue-collar economics, especially after the debacle of focusing on the so-called “47 percent.” The minimum-wage hike, especially as proposed by the Obama administration, is the wrong way to go about it. The US has repeatedly hiked the minimum wage, and yet has ended up in the same position in regard to the percentage living in poverty anyway. Why? Because raising the minimum wage only temporarily boosts buying power, as prices rise and jobs erode in response to the higher costs it imposes.

In fact, as the CBO pointed out, the majority of the costs end up being borne by the poor the minimum-wage hike is supposed to help:

Once fully implemented in the second half of 2016, the $10.10 option would reduce total employment by about 500,000 workers, or 0.3 percent, CBO projects (see the table below). As with any such estimates, however, the actual losses could be smaller or larger; in CBO’s assessment, there is about a two-thirds chance that the effect would be in the range between a very slight reduction in employment and a reduction in employment of 1.0 million workers…

The increased earnings for low-wage workers resulting from the higher minimum wage would total $31 billion, by CBO’s estimate. However, those earnings would not go only to low-income families, because many low-wage workers are not members of low-income families. Just 19 percent of the $31 billion would accrue to families with earnings below the poverty threshold, whereas 29 percent would accrue to families earning more than three times the poverty threshold, CBO estimates.

Moreover, the increased earnings for some workers would be accompanied by reductions in real (inflation-adjusted) income for the people who became jobless because of the minimum-wage increase, for business owners, and for consumers facing higher prices.

If minimum-wage hikes solves problems of poverty and inequality, then we would have solved both of those issues decades ago. We have yet to see any evidence that they actually produce anything but an extremely short-term benefit, and mostly to those who don’t need it. (Amity Shlaes presented an argument this week that it actually made the unemployment situation during the Depression substantially worse.) Unfortunately, the GOP hasn’t done a very good job of pointing out the pitfalls of this policy, while Democrats mainly demagogue the point on “fairness.”

What kind of economic message should Republicans have? We need to focus on policies that expand opportunity, especially in the entrepreneurial arena. The massive decline of business births over the last several decades has curtailed the kind of job creation and economic expansion that puts pressure on labor markets to increase compensation. As I argued in my column for The Fiscal Times this week, that decline is a result of a massively-expanded federal regulatory regime that stifles start-ups while giving advantage to rent-seeking large players in markets:

The problem, therefore, is national, and must relate to regulatory or tax policy or a combination of both. During this period, though, taxes didn’t increase sharply for businesses, at least not until recently. With few and temporary exceptions, though, the federal regulatory regime has only increased. The Phoenix Center pointed out this implacable escalation in its April 2011 policy bulletin on regulatory expenditures.

As a share of private sector GDP, the federal regulatory burden has increased over the same period as this study. The Phoenix Center recommended at the time that even a small decrease in federal regulatory burden – just 5 percent, roughly decreasing the regulatory budget by less than $3 billion – would generate an additional $75 billion in the economy and add 1.19 million new jobs to the private sector.

Instead, we passed Obamacare.

We have another indirect method to test this conclusion, too. Expanded regulation tends to favor larger and more established firms in a market, which have more resources and better economies of scale to deal with compliance issues. Sure enough, the Brookings Institution study found that kind of dynamism alive and well. “Whatever the reason,” the authors conclude, “older and larger businesses are doing better relative to younger and smaller ones.”

Instead of increasing costs on business and stifling even more jobs, the GOP should be aiming at cost and regulatory reductions, an expansion of energy production to lower costs even further, and streamlining the tax code to rid ourselves of the rent-seeking policies that offer unfair advantages to larger players. Republicans and conservatives should consider a more comprehensive and deliberate effort to rein in market consolidations on that basis, too. Anti-trust has always been more of a function of the other end of the political spectrum, but any effort to defeat crony capitalism has to aim at two targets: the reduction of centralized power in the public sector, and the reduction of centralized power in the private sector. Unless we’re serious about both, we’re not serious about ending crony capitalism, and we’re not serious about blue-collar economics.

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Comments

I do wish my fellow conservatives here would study the laws of supply and demand. The US Govt, through prodding by the Capitalists, have created an artificial supply of labor, which has had its desired effect. I prefer managed trade only with nations that have the same labor and environmental laws that we have here. But failing that, the blunt instrument of a minimum wage addresses the lower end workers unfairly treated in our corrupt system.

I do wish my fellow conservatives here would study the laws of supply and demand.

cimbri on May 9, 2014 at 8:18 PM

Agreed. Referring to Mitt Romney as a “RINO” doesn’t change the fact that we appear to have a shortage of prospective GOP presidential nominees not willing to sell low-wage workers down the river at the behest of the Chamber of Commerce. Wages have been stagnant for decades now, and instead of allowing an organic process in the marketplace, we’ve got Republicana looking to import more cheap labor.

One can’t help but notice that the same big corporate donors who are calling for so-called “immigration reform” are the same ones benefiting from the decreased labor costs.

Not seen this, but doesn’t a rising tide work in this instance…..? Won’t raising the bottom wage level increase wages up through most levels of employment, sooner or later? The optics of fighting burger flipping wages, stealing the compassion of the American trying to feel empathy for their less fortunate neighbors – is a fight that cannot be won. Even the Pope is on this bandwagon.
Will it eliminate more jobs, spur some inflation and implement technology to eliminate more of the most manual robotic types of low level work out there?
Sure will……but let the market work the way it always has.

A high minimum wage is hard on both employers and employees, on balance, but when it is forced through by the Left, it is good for conservatism.

It makes work marginally more respectable. It makes mooching off of taxpayers and calling for tax increases marginally less respectable.

Yes, I know all honest labor should be considered respectable, even honorable (how I consider it), but that isn’t the cultural reality, not in any culture, ever. It is not the way real human beings really function as groups.

Let them raise it. The pain will be worth it.

Conservatives supporting the minimum wage raise is like a mirror image of the Democrat’s position on illegal immigration. Sure, illegal immigration screws the Democrat base, royally, by adding massive amounts of cheap labor to compete with Democrat workers.

But the Democrats know they are changing the electorate by allowing the invasion, so they bide their time.

The same kind of strategy applies to conservatives supporting the minimum wage increase. People earning more money with their labor tends to make them more conservative. Politicians trying to take their earnings away from them with tax increases and the like ticks them off, and politicians promising more handouts of taxpayer money to people who don’t work is more likely to raise the ire of a worker being forced to pay the tax.

The Democrats are being smart about illegal immigration. They are playing the long game. We need to start doing the same.

Because there are many, many drooling idiots out there who prefer Obama as president. Some of whom, ironically, consider themselves conservative.

V7_Sport on May 10, 2014 at 11:44 PM

A vote on 11/06/2012 to keep Obama by default, which includes any rationalization for failing to vote for the last man standing with any chance to stop him on that day, was a vote for all of Obama’s odious, American society destroying idiocies, including first and foremost the continuation of the invasion and the termination of American Exceptionalism that will cause.

Was Romney lying about his self-deportation policy, even though the policy hurt him in the election? Maybe. But whatever you think the odds are that he would not have followed through on it, it was the very last chance America had.

Now we are done. America is done. Now We Are The World. And all of you worthless jackholes who didn’t vote for Romney on that day are directly to blame.